Fed Chair Jerome Powell has argued that introducing a US CBDC will undercut demand for crypto. That is one of the Fed’s motivations for producing its white paper. But a lot of the demand for cryptocurrencies such as Bitcoin is from the global underground economy, whether for illegal drug purchases on the dark web, sanctions evasion by Russian oligarchs, capital flight, money laundering, or tax evasion.
There is no getting around the need for strict regulation of advanced economies’ cryptocurrency use now, and of other countries’ CBDCs as they come into international use. The Fed’s reluctance to rush into launching a digital dollar is understandable, but that is no excuse for the slow pace of regulatory reform.
Kenneth Rogoff, professor of economics and public policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. The co-author of "This Time is Different: Eight Centuries of Financial Folly," his new book, "The Curse of Cash," was released in August 2016.